QT IMAGING HOLDINGS, INC.QTI
QT IMAGING HOLDINGS, INC. Income Taxes Disclosure
Income Taxes
Loss before income tax benefit consisted of the following for the years ended December 31, 2025 and 2024 :
(in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
United States | $ | (21,084) | $ | (9,001) | |||||||
International | — | — | |||||||||
Loss before income tax benefit | $ | (21,084) | $ | (9,001) | |||||||
Income tax benefit consisted of the following for the years ended December 31, 2025 and 2024:
(in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
Current: | |||||||||||
Federal | $ | (3) | $ | (5) | |||||||
State | 2 | (11) | |||||||||
Foreign | — | — | |||||||||
Total current tax benefit | (1) | (16) | |||||||||
Deferred: | |||||||||||
Federal | — | — | |||||||||
State | — | — | |||||||||
Foreign | — | — | |||||||||
Total deferred tax expense | — | — | |||||||||
| Total income tax benefit | $ | (1) | $ | (16) | |||||||
Income tax benefit differed from the amount computed by applying the federal statutory income tax rate of 21% to pretax loss as a result of the following for the years ended December 31, 2025 and 2024:
(in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
Federal tax at statutory rate | $ | (4,428) | $ | (1,890) | |||||||
State taxes | 2 | (1,486) | |||||||||
Change in valuation allowance | 1,020 | 5,861 | |||||||||
| Acquired intangibles | — | (2,142) | |||||||||
| Nondeductible | 3,125 | (481) | |||||||||
Other | 280 | 122 | |||||||||
| Total income tax benefit | $ | (1) | $ | (16) | |||||||
State taxes in California made up the majority (greater than 50%) of the tax effect in this category. In the year ended December 31, 2025, the Company received tax refund, net of $2 thousand from the State of California. The tax effects of
temporary differences that give rise to the Company’s deferred tax assets and liabilities are related to the following as of December 31, 2025 and 2024:
(in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
Deferred tax assets: | |||||||||||
Net operating losses | $ | 7,715 | $ | 5,753 | |||||||
Stock-based compensation | 1,134 | 956 | |||||||||
Operating lease liabilities | 184 | 295 | |||||||||
Section 174 expenses, net | 505 | 1,009 | |||||||||
Accruals and reserves | 407 | 412 | |||||||||
Intangible assets | 2,562 | 2,775 | |||||||||
Property and equipment | 82 | 76 | |||||||||
Other | 1 | — | |||||||||
Gross deferred tax assets | 12,590 | 11,276 | |||||||||
Valuation allowance | (12,430) | (11,017) | |||||||||
Net deferred tax assets | 160 | 259 | |||||||||
Deferred tax liabilities: | |||||||||||
Operating lease right-of-use assets | (160) | (259) | |||||||||
Net deferred tax assets (liabilities) | $ | — | $ | — | |||||||
Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized and amortized for U.S. tax purposes effective January 1, 2022. The mandatory capitalization requirement increases our gross deferred tax assets, which are fully offset by the valuation allowance. As of December 31, 2025, based on the Company’s recent history of losses and its forecasted losses, management believes on the more-likely-than-not basis that a full valuation allowance is required. Accordingly, the Company provided a full valuation allowance on its federal and state deferred tax assets. During the years ended December 31, 2025 and 2024, the valuation allowance increased by $1.4 million and $5.9 million, respectively. As of December 31, 2025, the Company had federal and state net operating loss (“NOL”) carryforwards of $27.3 million and $28.9 million respectively. The federal NOL will not expire and the state NOL will begin to expire in 2041.
The Internal Revenue Code (“IRC”) of 1986, as amended, imposes restrictions on the utilization of net operating losses in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use net operating losses may be limited as prescribed under IRC Section 382. Events which may cause limitations in the amount of the NOL that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. Utilization of the federal and state NOL may be subject to substantial annual limitation due to the ownership change limitations provided by the IRC Section 382 and similar state provisions.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is a follows as of December 31, 2025 and 2024:
(in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
| Balance as the beginning of the year | $ | 49 | $ | 49 | |||||||
Increases related to prior year tax positions | — | — | |||||||||
Increases related to current year tax positions | — | — | |||||||||
| Balance as the end of the year | $ | 49 | $ | 49 | |||||||
As of December 31, 2025 and 2024, the total amount of gross unrecognized tax benefits was $49 thousand, including interest and penalties of nil. As of December 31, 2025, none of the total unrecognized tax benefits, if recognized, would have an impact on the Company’s effective tax. The Company estimates that there will be no material changes in its
uncertain tax positions in the next 12 months. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
The Company files income tax returns in the federal and California state jurisdictions. The Company is not currently undergoing any income tax examinations nor did any examinations occur for the tax years 2021 through 2024.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. Among its provisions, OBBBA introduced Section 174, which allows for the immediate expensing of domestic research and experimental expenditures, reversing the amortization requirement enacted under the Tax Cuts and Jobs Act of 2017. Taxpayers may elect to expense such costs either entirely in the year incurred or ratably over a two-year period. The Company will elect to expense over a two-year period. As the Company has historically been in a loss position, the election to deduct domestic research and experimental expenditures will not have any impact to its financial results for the year ended December 31, 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 25, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Mar 25, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 31, 2022 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.